S.E.C. Sues 18 in Motel 6 Insider Case

Published: September 25, 1992

The Securities and Exchange Commission sued a public relations executive of Motel 6 and 17 other people yesterday, accusing them of illegal insider trading in the takeover of the economy motel chain in 1990.

The suit, filed in Federal court in Manhattan, seeks repayment of $4.5 million in reportedly illegal profits and penalties of three times that amount. The civil suit also names the brokerage firm Gorman Commodities and Securities Inc. of Beverly Hills, Calif.

The United States Attorney's office in Manhattan also filed criminal charges against two of the people who traded on the Motel 6 takeover tips. Dallas-based Motel 6, a nationwide chain of economy motels, was acquired by Accor, a French hotel and tourism company, in August 1990. Before the takeover, Kohlberg, Kravis, Roberts & Company had owned a majority stake of Motel 6 through various partnerships.

On July 12, 1990, Accor announced it would buy Motel 6 for $22.50 a share, almost $6 a share higher than the previous day's closing price on the New York Stock Exchange.

The S.E.C. charged that Hugh Thrasher, executive vice president in charge of corporate communications at Motel 6, had told his close friend Carl Harris about the planned deal. Mr. Thrasher, who retains his position at the company, reportedly was financially supporting Mr. Harris at the time.

The suit contends that Mr. Thrasher told Mr. Harris about the deal to bestow a gift" upon him. Mr. Harris has since died. Charge Is Vigorously Denied

"Mr. Thrasher did not trade on Motel 6 securities and he made no profits directly or indirectly on trading by others," Mr. Stillman said. "He did not tip anyone and intends to defend the S.E.C. action vigorously."

Motel 6 said in a statement that it had cooperated fully with the S.E.C. It said it was "obviously distressed" about the allegations against Mr. Thrasher, a longtime key executive, but felt it improper to comment further while the suit was pending.

In its suit, the S.E.C. is asking the court to order Mr. Thrasher to repay at least $227,939 representing illegal trading profits made by others.

The S.E.C. contended that Mr. Harris had tipped two relatives, his two roommates and numerous friends, most of whom traded on the information.

Some of those individuals paid Mr. Harris a percentage of their profits in exchange for the information and also passed the tip to others, the commission said.

Jeffery Sanker, one of Mr. Harris's roommates, and Gregg Shawzin, one of Mr. Harris's friends, were named in separate criminal charges. Both live in Beverly Hills, Calif.

The criminal charges contend that Mr. Sanker, 36 years old, who was a Los Angeles nightclub promoter, received $20,000 for tips he gave to others, which resulted in more than $480,000 in illegal profits. He is also charged with perjury.

If convicted, he faces a possible maximum prison term of 10 years and fines of more than $500,000.

Mr. Shawzin, 33, the owner of Futures Link Inc., a Beverly Hills commodities firm, reportedly made more than $550,000 from his own trades. If convicted he faces a possible maximum prison term of five years and fines of $250,000.

Of the 18 individuals named in the S.E.C. complaint, four have settled by agreeing to repay illegal profits.